EU and ECB argue over the fate of frozen Russian assets – Bloomberg

The European Union cannot reach an agreement with the European Central Bank on a plan to use the profits from more than 200 billion euros of frozen assets of the Russian central bank to restore Ukraine.

Source: This is reported by Bloomberg with reference to sources.

Details: Representatives of the EU executive on Thursday responded to ECB President Christine Lagarde's warning to the bank that measures against sanctioned holdings could threaten the financial stability of the eurozone and the liquidity of the common currency.

At the summit in Brussels last month, EU leaders agreed to proceed with caution during their work on the plan to tax windfall gains from immovable assets, with the European Commission initially saying it would come up with a proposal this summer.

However, according to one official, this timetable has been pushed forward to the Commission's summer break as the EU and ECB disagree on the issue, and now member states are divided on the two positions.

The commission rejected the ECB's arguments, saying that risks only arose — and were assessed — when the assets were initially frozen in February 2022, following Russia's invasion of Ukraine, and that so far none of those fears have materialised.

The windfall gain option does not affect the assets themselves or any requirements from the Russian Central Bank, nor does it affect the EU's role in holding securities, one of the sources said.

These differences were revealed at the meeting of the finance ministers of the eurozone, which was attended by Lagarde and the vice president of the European Commission, Valdis Dombrovskis.

The head of the ECB said the windfall tax could undermine the euro and lead to a rethink among reserve holders. She noted that the amount at stake was much greater than the several billion this step would bring to Ukraine.

She also called for caution and emphasised that any decision should be made only with the support of the Group of Seven.

The frozen assets could generate around €3 billion in windfall gains, although some estimates suggest the figure could be even higher.

More than half of the assets are in cash and deposits, while a "significant amount" of the rest is in securities that will be converted to cash as they mature over the next two to three years.

Background: Germany has spoken out against the European Commission's plan to give Ukraine profits from frozen Russian assets, saying the hasty move could cause legal or financial risks.

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